Project Auckland: Progress on the Construction Sector Accord

Katrina van Houtte. Photo / Supplied

With Auckland a big winner in the Government's $12 billion infrastructure programme, there is a real opportunity for the region to accelerate progress on the Construction Sector Transformation Plan.

The plan, released last month, is the first major deliverable from the Construction Sector Accord signed in April 2019.

It explains how the lofty accord goals of increasing productivity, raising capacity, improving resilience and restoring confidence, pride and reputation in the sector will be achieved.

The plan refers to a need to address the poor understanding of risk and who should bear it, poor procurement skills, and distrust between the parties.

This is consistent with the findings of the Treasury's Infrastructure Transactions Unit in their August 2019 report examining the issues associated with the use of NZ standard conditions of contract in the public sector.

To address the issue, the accord leadership group plan to work with the Infrastructure Commission to promote and refine the aonstruction procurement guidelines on an ongoing basis.

The guidelines are peppered with Abrahamson's well-known statement that risk should sit with the party best able to manage it. Little detail is provided on how exactly this achieves a fair risk allocation.

Unfortunately this statement has historically been used to justify an unfair risk transfer to the contractor, because of course the owner, for whom construction is not their core business, is not best placed to manage the risk, as they do not have the necessary specialist expertise.

The question we should instead be asking is whether it represents good public value for the risk to be transferred to the contractor and then priced, or should the public sector retain the risk and pay for it only if it eventuates.

It does not further the other accord goal of building resilience in a fragile sector for all risks to be transferred away, even if the contractor (and specialist subcontractors) may have the skills to manage them.

The plan asks that all participants in the sector take ownership for calling out behaviours that are not consistent with the accord.

It remains to be seen whether participants feel sufficiently safe to do so in the practical reality of a competitive tendering market.

• Katrina Van Houtte is special counsel in the construction and major projects team at Dentons Kensington Swan.